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Why does a depository institution usually make short term loans and buy short term investments?

Why does a depository institution usually make short term loans and buy short term investments?
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Answer #1

A depository institution usually makes short term loans and buy short term investments to
1. To mange and increase liquidity in the institution,short term investment and short term loans gets liquidated in short period of time.
2. To manage the duration of assets and liabilities short term loans an short term investments play a huge role.
3. It helps in paying off its short term liabilities .

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